Finance Essay Example | Topics and Well Written Essays - 1500 words - 2

Finance - Essay Example Because currency exchange rates fluctuate on a daily (minute-to-minute) basis, clean and easy apples-to-apples comparisons of U.S. dollars to Euros or Yen may not be possible, especially with systems that deal with data on an intraday basis. Tracking the profitability of products in varying markets will fall short of expectations unless data stores and currency tables that contain detailed exchange rates and valuation dates are properly integrated into the general warehouse or operational data store. Many currencies will be tracked against other currencies - the simplest being home currency versus the single currency of the trade/deal/transaction - using parallel fields for each denomination in the appropriate warehouse tables. Thus, if a transaction took place in Japan (in Yen), multiple fields that represent the event would have both U.S. dollars and Yen denominations that communicate up-to-date or restated exchange rates. The business firm must also be aware that the location of t he transaction does not always unequivocally define the currency of the transaction. Many financial events such as currency swaps and spots will fall into this category, making it more laborious to correctly portray the financial picture of the business. Unexpected changes in the values of foreign currencies can affect the profitability of doing business internationally by unexpectedly changing the home currency value of future foreign currency-denominated cash inflows and outflows. This implies that organizations will need to consider implementing foreign exchange â€Å"hedging† strategies to mitigate the adverse consequences of unexpected and profit-reducing exchange rate changes. Suffice it to say that organizations may wish to seek the assistance of available expertise in the banking or brokerage communities to design and implement a foreign